regulations Bitcoin ATMs bitcoin and changes to kyc

Regulation Bitcoin ATMs Bitcoin

Regulation has become more frequent over the past few years, with many new restrictions placed on Bitcoin ATM operators. This may have translated into a slowdown in the addition of new Bitcoin ATMs in Europe and "stricter" KYC verifications. Fortunately, the pace of new cryptocurrency devices is positive, with new Bitcoin ATMs popping out of nowhere "like mushrooms after the rain."

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On the one hand, more regulation can be viewed as a good thing:

• regulations eliminate pre-existing doubts about how to start a fully legal bitcoin ATM business;
  

• Current and especially large operators can view this as a positive, as the new regulations become a barrier to entry for new players and eliminate competition.

However, in general, more regulation creates new requirements for companies to meet and usually drastically worsens the user experience, for example:

• users must verify their identity (scan their ID and take a photo) at lower transaction thresholds, which means more time in front of screens Bitcoin ATM (in Poland, €1,000 or a covered face);
  

• limits the user base to the use of bitcoin ATMs, as Bitcoin ATM was intended to be a tool for unbanked people to gain financial access to online services - meanwhile, there are cases where people do not have a bank account due to lack of identity documents / legal status, and in this case, they cannot use Bitcoin ATMs either.

The new regulations may also restrict the operations of bitcoin ATM operators, like the recent suggestion by the Central Bank of Singapore to suspend all operations at Bitcoin ATM.

Here we list some of the regulations that have been introduced recently that have or may have an impact on bitcoin ATM operations.

If you're not interested in which direction Bitcoin ATMs regulations are heading in the world, you'll probably be interested in the issue of taxing Bitcoin ATM transactions in Poland in our analysis of Bitcoin ATMs a tax on Bitcoin.

US: Government Accountability Office (GAO) - requires operators to regularly send ATM location information

We're talking about a report issued by the Government Accountability Office, a government legislative agency that provides research to the US Congress. In their 83-page report, they discuss various theoretical scenarios in which bitcoin could be used for illegal activities such as human and drug trafficking - but without providing any substantial evidence of bitcoin ATMs' involvement in these activities. 

As a conclusion in the recommendations to FinCEN and the IRS, it is recommended that operators be required to report information on locations - on an ongoing basis. The report lacks justification for this need for additional data collection. It does not answer the question of how the report will help prevent crimes. 

If this recommendation becomes law, it will drastically increase operating costs for operators, which will in all likelihood be passed on to Bitcoin ATMs users through increased ATM fees. This new regulation seems highly questionable, given that a recent Chainanlysis study found that only 0.15% of 2021 blockchain transactions are linked to illegal activity.

US: License requirements for money transfer in Florida and Arkanzas

In 2021, both states amended their laws to require "virtual currency" providers to obtain licenses to transfer money and expanded certain reporting and record-keeping practices. The requirement also extends to Bitcoin ATM operators in those states.

Singapore: Monetary Authority of Singapore (MAS) closes all bitcoin ATM operations

On January 17, 2022, the Central Bank of Singapore made an abrupt announcement that all bitcoin ATMs are to be halted immediately. The motivation behind this change is the "Guidelines for Discouraging Cryptocurrency Trading by the General Public," and ATMs are a form of such promotion in public places where customers can make impulse transactions without fully understanding the risks involved. 

In a conversation with Singapore operators who were forced to close their business, we learned that this decision appears to be final. This news came as a unique surprise, as Singapore has always been considered a cryptocurrency-friendly country.

UK: Bank of England calls for tighter regulation of Bitcoin ATMs BTC

In its December 2021 Financial Stability Report. The Bank of England outlines its general stance on cryptocurrencies: 

"Cryptocurrencies currently pose limited immediate risks to the UK's financial stability. However, they will pose a number of risks to financial stability if they continue to grow at their current rapid pace and as they become more interconnected with the wider financial system." 

The report does not provide any analysis of ATM activity, but given the FCA's drastic restrictions on bitcoin ATM operations in 2020, the legal framework for operating Bitcoin ATMs is not expected to improve in the UK.

Estonia: ban on anonymous transactions

This is a broader regulatory effort, as it derives from the FATF's amendments to the travel regulations. The requirement means that any transaction using a VASP (virtual asset service provider) must involve an identified user. 

Bitcoin ATM operators fall under the VASP category, which means that all ATM users will have to be fully identified before using the machines. The changes were approved by the Estonian government in December 2021, and now must pass through parliament and are expected to be implemented in the first half of 2022

It is fortunate that the first better Bitcoin ATM in Warsaw is not restricted by a similar law.

Hong Kong: Securities and Futures Commission (SFC) proposes to ban retail investors from trading cryptocurrencies

Hong Kong's regulator plans to expand anti-money laundering regulations and restrict the retail sector to cryptocurrency trading. 

The status of ATMs under this regulation is currently unclear, but it is very likely that ATM operators may face more regulations, as the government said in a consultation document that it would consider regulating them "when the market is ready."

As can be seen from the above examples, it is a worldwide trend to increase regulation of bitcoin ATMs and restrict their operations. At the same time, the additional requirements burden ATM operators, and limit retail customers' access to ATM services, as well as increase the cost of doing so. 

Since the IMF says cryptocurrencies pose a threat to countries' financial stability (read: impose controls on central banks' money printing and let populations avoid increasingly overvalued assets and transact privately without intermediaries), we expect regulations to become more stringent in the future.

If you want to be even more informed about cryptocurrencies in terms of the law, we recommend the article Bitcoin ATMs and bitcoin vs. taxes - what and how.